Labour supply, foreign investment and welfare in the presence of public infrastructure
AbstractWithin the context of a small open economy where both foreign investment and the provision of public infrastructure are endogenous, this paper examines the impact of an exogenous increase in labour supply. An increase in labour supply can be attributed to labour inflow. A number of empirical studies have demonstrated the importance of public infrastructure in real economies and both developed and developing countries have attracted significant foreign investment in recent years. This paper shows that, in the case of a diversified equilibrium, variations in labour supply do not affect the wage rate, provision of public infrastructure or welfare. However, an increase in labour supply decreases foreign investment as long as the producers of the private goods derive equal benefits from public infrastructure. In the case of complete specialisation, an increase in labour supply increases the provision of public infrastructure, which leads to an increase in the wage rate and foreign investment. An increase in labour supply increases welfare as long as the provision of public infrastructure involves some fixed cost.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 25 (2008)
Issue (Month): 5 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Garvin & Charles Cheah, 2004. "Valuation techniques for infrastructure investment decisions," Construction Management and Economics, Taylor & Francis Journals, vol. 22(4), pages 373-383.
- R. Manning & J. McMillan, 1979. "Public Intermediate Goods, Production Possibilities, and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 12(2), pages 243-57, May.
- Din, Musleh-ud, 1996. "International Capital Mobility and Development Policy in a Dual Economy," Review of International Economics, Wiley Blackwell, vol. 4(2), pages 185-201, June.
- James P. Feehan & Mutsumi Matsumoto, 2000. "Productivity-enhancing public investment and benefit taxation: the case of factor-augmenting public inputs," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 114-121, February.
- Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
- Boisso, Dale & Grosskopf, Shawna & Hayes, Kathy, 2000. "Productivity and efficiency in the US: effects of business cycles and public capital," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 663-681, December.
- P. Demetriades, 1998.
"International Aspects of Public Infrastructure Investment,"
CIBS Research Papers in International Business
8-98, London South Bank University CIBS.
- Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 2003. "International aspects of public infrastructure investment," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 884-910, November.
- Spiros Bougheas & Panicos O. Demetriades & Edgar L. W. Morgenroth, 2001. "International Aspects of Public Infrastructure Investment," Discussion Papers in Economics 01/4, Department of Economics, University of Leicester.
- Wang, Eric C., 2002. "Public infrastructure and economic growth: a new approach applied to East Asian economies," Journal of Policy Modeling, Elsevier, vol. 24(5), pages 411-435, August.
- Gemmell, Norman & Kneller, Richard & Sanz, Ismael, 2008. "Foreign investment, international trade and the size and structure of public expenditures," European Journal of Political Economy, Elsevier, vol. 24(1), pages 151-171, March.
- Bucovetsky, S., 2005. "Public input competition," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1763-1787, September.
- Egger, Hartmut & Falkinger, Josef, 2006. "The role of public infrastructure and subsidies for firm location and international outsourcing," European Economic Review, Elsevier, vol. 50(8), pages 1993-2015, November.
- Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, January.
- Satya Paul & Balbir S. Sahni & Bagala P. Biswal, 2004. "Public Infrastructure and the Productive Performance of Canadian Manufacturing Industries," Southern Economic Journal, Southern Economic Association, vol. 70(4), pages 998-1011, April.
- Rioja, Felix K., 1999. "Productiveness and welfare implications of public infrastructure: a dynamic two-sector general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 58(2), pages 387-404, April.
- Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
- Ang, James B., 2008. "Determinants of foreign direct investment in Malaysia," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 185-189.
- Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.